Real estate is a startup's second largest fixed expense, surpassed only by employee compensation. Consequently, finding an optimal solution for the company's office needs can have a dramatic effect on the bottom line. However, a workspace is not all dollars and cents. It serves as the physical manifestation of the ideals that a company represents, as well as a second home for its employees. Despite its importance, many real estate decisions are made based on incomplete information and with a lack of strategic planning. To help figure out the best way for startups to get office space, I spoke to Chris Lisle, President at Avanti Development Partners, for his advice on the process. Based off of our interview, here are the four common mistakes to take in mind when looking for office as a startup:

1. Location

The importance of location in real estate goes without saying. However, which aspects of location matter most to startups? Often companies are seduced by low rents and readily available space outside of central business districts. In hopes of enticing tenants to these secondary locations, many landlords even offer "Move in Ready" packages that include pre-installed furniture and phone systems. While these options are attractive for a startup trying to manage expenses, they can have serious and unforeseen long term consequences.

"Move in Ready" offices charge significantly higher rents than traditional space, which over time will add up to a greater total cost than simply building and furnishing a traditional space. In addition, these concepts are designed to appeal to a wide variety of companies and are not necessarily a good fit for a specific startup's needs.

I always advise startups to locate in close proximity to central business districts for several reasons. City centers provide a unique lifestyle with vibrant cultural and entertainment options, attracting today's top young talent. This demographic affords well located companies a recruiting advantage over their suburban counterparts. As a result of the density in city centers, startups and their most important resources, for example financial institutions, are able to locate in close proximity to one another. This helps to reduce wasted time traveling between meetings and creates an environment that fosters partnerships and the exchange of ideas.

2. Improperly sized space

Determining the appropriate size for a new office space can be a difficult decision for any company. Mature companies are able to draw on past experience and industry standards to steer their decisions. For startups, the answer may not be so straightforward. Rent a space too large and you're carrying unnecessary fixed overhead. Rent a space too small and your team is bursting at the seams, leading to decreased productivity, well being and a challenged work environment.

To achieve the right balance, it is helpful to determine how your company will eventually utilize the space. Gather your team and discuss their wants and needs for a workspace, as well as the company's near term expansion plans. Consider these requirements, then engage a design professional to distill those ideas into a conceptual space plan. This exercise will provide an approximate size and layout that can be used in the search for the right space.

3. Inflexible space planning

Traditional office design is filled with fixed walls and partitions, dividing the workplace into a static collection of public and private spaces. This fixed and outdated model prevents spaces from being easily reconfigured to meet changing needs. As they grow and mature, startups are in a continual state of change. This constant should be reflected in workspace design, allowing the layout and function of an office space to adapt to evolving needs. However, many startups are still burdened by inefficient spaces, often based on typical "one size fits all" models.

When designing a workspace for a startup, it is best to avoid fixed walls and confined offices, in favor of large open spaces with a modular design. Moveable partition systems allow spaces to be reconfigured quickly and at a very low cost. They also allow the same space to serve multiple functions. For example, a lounge area can be converted into a conference room by simply enclosing it and rearranging the furniture. This increases the efficiency of the workspace by accommodating more uses in a smaller area, ultimately reducing overhead.

4. Doing it alone

For many startups, finding and building a new office space is one of their first experiences with the real estate industry. Without the proper expertise, companies can easily overspend on their monthly lease rate and the construction of their new workspace. Even worse, they may end up with a final product that doesn't properly fit their needs. To avoid these problems, it is critical that startups engage a qualified corporate real estate consultant to guide them through the process.

An experienced consultant has a depth of experience in leasing, design and construction and will provide immense value to startups. They will manage the entire real estate process and solicit client feedback regarding key decisions, saving both time and money. Most importantly, they will free up company executives to focus on managing their core business. The strategic advice of a corporate real estate consultant will prove to be money well spent, as a quality, affordable and well-designed office space will provide the foundation upon which a startup can grow to the next level.

Published on: Dec 5, 2015
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